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The Eurodollar Futures and Options Handbook by Galen Burghardt

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CHAPTER 16Trading the Turn: 1993

Galen Burghardt, Mike Bagatti, and Kevin FerryResearch note originally released October 25, 1993

SYNOPSIS

The last time there was any serious pressure on year-end financing rates was 1986. Even so, the memory lives on, and “the turn” still has an effect on people’s thinking about the way they finance positions over year end. Exhibit 16.1, for example, shows a huge change last November in the spread between the December ′92 and January ′93 LIBOR contracts. Given the rules of thumb developed in this note, the 60-tick drop in the spread suggests that the market briefly expected a 500-basis-point increase in the turn premium.

EXHIBIT 16.1LIBOR Futures Calendar Spread December 1992/January 1993

“The turn” is a 2-, ...

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